November 11,2008
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Credit Card Tips: 101, Pt.2
– Economy goes ‘kerplunk', so does interest rate.Tip No. 2: Get a good rate.
Look for a credit card offer with a 0% purchasing rate or close to it, at the on-set. With our trashed economy, they're a dime a dozen now. They're generally based on the Prime Interest rate (that's what the issuing bank has to pay out themselves in order to lend you the money). It used to be that Prime was so high that typical home mortgage rates were around 21% (ok, I lied, it was actually 20.9999999%). Funny thing was, we were all ok with that. We bought homes just fine, never saw a homeless person, etc. Credit cards always carried high interest though.
Credit card interest rates fell rapidly when Mr. Bush first came to power in 2000, Wall Street plummeted from the steeple to the basement. Poor Mr. Greenspan was put on the spot to fix the economy quick. About the only tool at Mr. Greenspan's disposal was a ‘gas-pedal' that was supposed to get our nation over the mountain. The ‘gas-pedal' was (and still is) the Fed-Rate (linked to Prime). Lowering Prime was to give the engine more power. The 2000 crash was so bad that Mr. G had to depress the gas-pedal to the floorboard (lowering the Fed-Rate further and further until it finally reached zero). As we know, conditions were so bad, even that was not enough to cross the mountain. We never did recover but, at least credit card interest fell to 0% also.
Two tsunamis were spawned from this under-water economic implosion. One was in the housing market where the 0% (and close to zero percent) Prime rate made buying homes irresistible (off the back of other industries). The other tsunami was in the credit card industry. Although this writer personally lost his shirt on Wall Street, he did benefit from 0% interest credit cards starting in the year 2000 and has enjoyed 0% interest credit cards ever since.
As tsunamis do, they were both undetected for a long time. Like the waterline on the beach, interest rates continued to recede from the shoreline until the initial energy wave finally made landfall. It took seven years for the first to hit (the housing market). The second tsunami (credit card lending) has yet to hit, but is not far off. There is safe shelter for the prudent, however, and 0% interest credit can provide great relief by following the tips that follow.